Multinational Firms’ Location and the New Economic Geography

Multinational Firms’ Location and the New Economic Geography

New Horizons in International Business series

Edited by Jean-Louis Mucchielli and Thierry Mayer

This book analyses how foreign direct investors choose their locations, whilst exploring the forces which shape international economic geography. Although these two issues are, to some extent, inter-related, researchers have only recently acknowledged the similarity of economic geography and international business approaches to the empirical assessment of likely causes of the degree of spatial concentration observed in many modern industries.

Chapter 2: Globalization, agglomeration and FDI location: the case of French firms in Europe

Jean-Louis Muchielli and Florence Puech

Subjects: business and management, international business, economics and finance, regional economics, geography, economic geography, urban and regional studies, regional economics

Extract

2. Globalization, agglomeration and FDI location: the case of French firms in Europe Jean-Louis Mucchielli and Florence Puech INTRODUCTION 2.1 Even though French firms started to invest abroad only recently (French FDI flows were almost insignificant before the second half of the 1980s), nowadays France plays an important role in the world with its international investments. Despite an important decline of its FDI outflows in 2001, France became the second most important investor ($82.8 billion) behind the USA (UNCTAD, 2002). However, multinational firms’ location strategies are generally developed by a concentric process illustrated by a progressive international diffusion of their activities. At the beginning of the internationalization process, plants are settled in border countries and, then, multinationals progressively invest in farther territories. But at the end of 2000, French international investments are still strongly located in the European area: more than the half of the French FDI outwards stock is located in Europe.1 As regards determinants of firms’ internationalization, two approaches are complementary. The first is to identify the main incentives which influence the choice of producing abroad (‘why do firms internationalize their activities?’). The second concerns firms’ international location choice (‘where do firms locate?’). With the renewal of interest of spatial economic geography, increasing numbers of articles in economic literature are devoted to multinational firms’ location. An important part of these recent studies emphasizes the phenomenon of FDI agglomeration (see Ferrer, 1998, for French FDI in European regions; Ford and Strange, 1999, or...

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